Wednesday, August 22, 2012

Expect Paycheck Cycles Internationally

Last year, as Walmart Stores, Inc. was on its way to turning around eight successive quarters of declining same-store sales, the company noticed how daily revenues during the first few days of each month were higher than daily sales during other days. Walmart attributed this to when paychecks were received and said it was evidence their customers were living paycheck to paycheck. Walmart changed their tactics to take full advantage of the cycle. They began to feature the higher-priced merchandise at the start of each month.
Now Walmart has announced sales at U.S. stores open at least one year rose 2.2% during this last calendar quarter, and The Wall Street Journalreports that Walmart is seeing the paycheck cycle at their stores in other countries as well, notably in the U.K.
Shoppers go through many sorts of cycles. It makes sense to cycle the merchandise to fit changing preferences. Before adapting this principle to your retailing business, consider a couple of points. First, your target demographic might be getting their paychecks weekly or biweekly rather than monthly. Within the monthly cycle, there could very well be smaller bumps at weekly intervals.
The second point to consider is that Walmart depends strongly on an image of everyday low prices on all items. The competitiveness of your business model may not depend that much on price. Do the paycheck cycles still make a difference in optimal merchandising techniques? Yes, but from a different angle. Research at University of Utah and University of Iowa finds that the effects are due to more than the consumer running out of money each interval. Paycheck cycles were found to affect not only how much money people will spend on merchandise, but also the types of merchandise they will find most attractive.
In the days soon after receiving a paycheck, consumers with full-time jobs become very interested in products and services that help them gain more than what they currently have. This is a time for you to feature the latest technologies and the toothpaste which promises to whiten teeth.
Then as the days after the paycheck pass, the person becomes progressively more interested in products and services which help them avoid losing what they have now. They'll pay greater attention to nostalgia items, familiar brands, and the cavity-fighter toothpaste.
The researchers determined that this cycling was not principally because of cycles in consumers’ disposable income.

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Bruce D. Sanders, PhD, SPHR

I’m a consumer psychologist, retail consultant, and human resources advisor who specializes in helping providers of products and services make and save more money. The key is putting to use what we’ve discovered about the ways in which our customers, clients, patients, and prospects find value in what we offer. I've worked with thousands of merchants and professional practitioners to maximize their business profitability and joy in selling. Please contact me at rimtailing@gmail.com.